Govt Allows LIC to Hold Up to 30 Percent in Companies

Bangalore: Hard pressed to meet the Rs.30,000 crore disinvestment target, the Finance Ministry permitted the state-owned Life Insurance Corporation to invest up to 30 percent in a company as against the earlier ceiling of 10 percent.

"LIC can invest up to 30 percent of a company's paid-up capital. Earlier it could invest up to 10 percent," Financial Services Secretary D K Mittal told reporters here.

The notification relaxing investment norms for LIC has been issued, he added.

The new norms will enable the cash-rich LIC, which invests around Rs.50,000-60,000 crore in equity annually, to pick up higher equity in state-owned companies during the disinvestment process.

Insurance regulator IRDA, however, was against LIC picking up more than 10 percent equity in a company. It wanted LIC to stick to the norms applicable for private insurers.

The government's decision is apparently aimed at pushing through the disinvestment process which had so far remained a non-starter.

The government in the budget for 2012-13 had proposed to raise Rs.30,000 crore from stake sale in PSUs.

Finance Minister P Chidambaram in a recent interview to PTI had expressed the confidence that government would endeavour to be as near the target as possible.

The government proposes to sell equity in several state-owned companies like Nalco, Hindustan Copper, SAIL, BHEL, MMTC and Oil India Limited (OIL). It is also planning to sell residual equity in companies privatised earlier.

In view of the subdued tax collection and subdued revenue realisation, the Finance Ministry had raised the fiscal deficit target for the current fiscal to 5.3 percent of the Gross Domestic Product (GDP) from 5.1 percent estimated earlier.
 

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